Interest Rates, Stock Markets, and Inflation
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February 2023 Market Insight
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Economic developments haven't been as positive in February as we had hoped. As illustrated in the first chart below, interest rates have been climbing this month (after the large drop from November). Mortgage application rates have also turned volatile after the positive growth trend at the beginning of the year, dropping in 2 of the past 4 weeks, including the most recent week - though refinance applications have declined further than purchase applications.
This is all very short-term data, which could turn around again in a heartbeat.
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The Fed increased its benchmark rate by 0.25% and inflation has declined, signaling that mortgage rates may come down in the summer.
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The significant decrease in new listings indicates a much slower housing market, at least until spring.
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Although still one of the best long-term investments, home price appreciation will likely be muted this year as higher interest rates stymie increases, especially in the first half of the year.
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Below is the long-term chart using Freddie Mac's weekly average numbers as reported on the morning of 2/16/23. Weekly average rates are still well behind the daily rates reported by Mortgage Daily news, illustrated above. The next Freddie Mac reading will be on Thursday. Different sources often use different methodologies to calculate their average rates for "30-year fixed rate loans," but trends up or down are typically very similar.
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With some volatility, stock markets have fallen in February, but remain well above where they started the year, especially the Nasdaq. Affluent buyers generally seem to be affected more by financial markets than by interest rates, though of course, economic factors are often intertwined.
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January's inflation index, released last Tuesday, fell only very slightly from December, which spooked the bond market - and to a lesser extent, stock markets - which had hoped for a more substantial decline. The cover of The Economist this week is titled, "Why Inflation Will Be Hard to Bring Down" - they believe investors are over-optimistic, which doesn't mean their analysis is better than others. Opinions vary widely.
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4 BD | 3 BA | 6251 Lot SF | $3,800,000
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This stately shingle home boasts enormous curb appeal!!
Beautiful vintage architecture and character, with tasteful modern updates throughout.
Hardwood floors, beautiful moldings and baseboards, wainscoting and many other period details, high ceilings, and abundant natural light throughout.
Large remodeled kitchen, formal dining room, spacious living room, and sitting area, as well as a large multi-purpose room with ensuite bathroom, which could be used as an office, family room, gym, or bedroom.
An additional ensuite bedroom completes the main level.
Upstairs features two additional bedrooms, a full bathroom plus the large en-suite Master bedroom.
Kitchen/family room opens to the large landscaped and flat yard.
Level lawn and patio areas.
Attached garage plus driveway.
Dreamy master, A++ location!!
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Compass is a real estate broker licensed by the State of California operating under multiple entities. License Numbers 01991628, 1527235, 1527365, 1356742, 1443761, 1997075, 1935359, 1961027, 1842987, 1869607, 1866771, 1527205, 1079009, 1272467. All material presented herein is intended for informational purposes only and is compiled from sources deemed reliable but has not been verified. Changes in price, condition, sale or withdrawal may be made without notice. No statement is made as to accuracy of any description. All measurements and square footage are approximate. Equal Housing Opportunity. Photos may be virtually staged or digitally enhanced and may not reflect actual property conditions.
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